The stock market rose again this morning, after the Federal Open Market Committee (FOMC) announced yesterday that it would hold interest rates at their current 1/4 to 1/2 percent target and hinted it could raise rates but once before the end of this year. Read more about The Fed Again Holds Rates 09-22-2016
With the next Federal Open Market Committee policy-setting meeting looming on the horizon, it has been a rather volatile last week for stocks. Conflicting messages from top Fed officials have made trying to pinpoint the U.S. central bank’s policy stance a frustrating, if not impossible, task for market participants, leading to the day-to-day swings in the market.
In remarks last Friday, President of the Federal Reserve Bank of Boston Eric Rosengren said that it’s becoming increasingly more risky to not raise interest rates. With unemployment rates declining from 8.2 percent in 2012 to a now 4.9 percent, ensuring that we stay at full employment will require some tightening, Rosengren says. Rosengren’s main concern is that if Fed policy remains unchanged for too long, despite the resilience the U.S. economy has shown, it could begin to overheat.
Read more about Fed Doubts 09-15-16
The U.S. Department of Labor last Friday reported a disappointing number of new nonfarm hires in August, only 151,000—some 30,000 less than most economists expected. The number of weekly hours worked declined and average hourly wages growth slowed. Meanwhile, the labor participation rate remained near 40-year lows at 62.8 percent.
In the new Jobs Opening and Labor Turnover Survey (JOLTS) released by the U.S. Department of Labor yesterday for July, it appears that both the current rate of hiring and voluntary job departures, for whatever reason, fall below the normal rate witnessed before the Great Recession. Thus workers cannot access their key means of accessing wage increases—the ability to change jobs. Read more about Labor Market Problems, Dividends Still Pay 09-08-16
The market seemed somewhat flummoxed by the apparent confusion at the Fed last week, after Chair Janet Yellen spoke at the Kansas City Fed's annual Jacksone Hole, Wyoming confab. She basically said that market conditions continue to improve and recent economic data support a rate increase, although this would be gradual.
While the market initially took that to translate to only one rate hike this year, investors did not like what Fed Vice Chair Stanley Fischer said next: that Yellen’s speech was consistent with the possibility that the Fed might raise interest rates twice this year. In other words, the central bank could tighten monetary policy more quickly than expected, after all. Read more about Despite Fed Confusion, Good Dividend Stocks Pay 09-01-16
We received some good unemployment and durable goods data today. The U.S. Department of Labor reported that new unemployment claims fell to a seasonally adjusted 261,000 last week, its third consecutive drop in as many weeks. New jobless claims this summer have stood more or less near their lowest level in 40 years—at under 300,000 for 77 consecutive weeks, the longest span since 1970. Generally the labor market is considered strong and growing when claims stay below 400,000. Read more about Markets Uneasy in Advance of Confab 08-25-16